Which of the following is ALWAYS true for a profit-maximzing single-price monopolist?
A) P = MC
B) P = MR
C) MR = MC
D) MC = ATC

Question

Quizplus · Accepted Answer

A profit-maximizing single-price monopolist will always produce at the output level where marginal revenue (MR) equals marginal cost (MC) (C). This is because they will continue to produce as long as the additional revenue from selling one more unit (MR) is greater than the additional cost of producing one more unit (MC). Choosing any other output level would result in lower profits. While price (P) may be higher than MC, it is not always equal to it (A). Additionally, MC does not need to equal ATC (D), as the monopolist may still make a profit even if ATC is higher than price. Finally, P may not always equal MR if the monopolist has market power and can adjust price without losing all customers (such as in a differentiated product market).

Which of the Following Is ALWAYS True for a Profit-Maximzing